Child of Alibaba, the biggest payment App in China valued at $150 billion Alipay officially banned over-the-counter (OTC) Bitcoin trading. In other words, traders can no longer utilize Alipay accounts to initiate digital asset trades.
Indeed, the announcement regarding this ban was more than crystal clear, shared by Red Li, a cryptocurrency researcher and the co-founder of Chinese cryptocurrency community 8BTC in a tweet, he explicitly stated that users of Alipay are not allowed to use the financial network to trade Bitcoin in OTC and unregulated markets.
Why Ban OTC Trading?
Before answering that, we need to grasp the immense scope of Alipay in the Chinese market:
In fact, the Chinese government recently allowed overseas companies to operate within the local market with licenses, due to the funneling strategy used by China, Alipay has already reached mass adoption, with over half of the Chinese population already using Alipay and 90 percent of mobile customers using the network as the primary payment method.
For many years, Alipay has shown optimism towards cryptocurrency and blockchain technology: Jack Ma, the founder, and chairman of Alibaba claimed in many occasions that cryptocurrencies as consensus currencies and blockchain-based distributed systems will achieve massive mainstream adoption in the future, yet he would still describe Bitcoin to have “bubble-like” characteristics.
Despite all the enthusiasm towards the cryptocurrency and blockchain sector, Alipay was somehow pressured to eliminate cryptocurrency traders from its network indirectly, when the government of China asked all banks and financial service providers in February to ban Bitcoin trading accounts:
“To prevent financial risks, China will step up measures to remove any onshore or offshore platforms related to virtual currency trading or ICOs,” as stated in a publication by Financial News affiliated to People’s Bank of China (PBOC). Thereupon, Alipay was asked to prevent its financial network from being used to fuel cryptocurrency trades, especially that a large number of traders in China have been trading Bitcoin in a peer-to-peer manner in the OTC and unregulated market, without the authorization of the government. The Financial News continues:
“ICOs and virtual currency trading did not completely withdraw from China following the official ban … after the closure of the domestic virtual currency exchanges, many people turned to overseas platforms to continue participating in virtual currency transactions.”
After all, being best friends with the Chinese government, Alibaba came forward with a decision, stating that individual accounts should not be used in trading Bitcoin in unregulated markets and any sign of trading will lead to the shutdown of the account. The End